"The Federal Board of Revenue (FBR) is cognizant all issues emanating out of SRO 98(I)/2013 dated 14 February 2013 and steps are being taken to address all problematic issues in consultation with Institute of Chartered Accountants of Pakistan (ICAP) so that businesses may not be adversely affected due to new set of sales tax withholding rules".
This was stated by Khawaja Tanveer Ahmad, Chief Commissioner, Regional Tax Office, Karachi while addressing a jam packed seminar organized by ICAP Southern Region Committee (SRC) here at Karachi.
During his address, the top sales tax official of FBR dilated upon reasons why Government failed to introduce a broad based Value Added Tax (VAT) in 2009. He explained that in the past FBR's enforcement arm was frozen for sometime resulting in suspension of tax audits; as a result most of the field officers forgot techniques for conducting meaningful tax audits.
However, he agreed that collec- tion of sales tax through withholding schemes was negation of self assessment, which should be discouraged. Aimed huge applause, Khawaja Tanveer Ahmad categorically declared that SRO 98 will be amended to cater and suit business operations and no business needs to modify its operations due to the new withholding tax scheme.
Upon a question, the Chief Commissioner also clarified that FBR has no objection to allow input tax credits to its taxpayers whose corresponding output tax was being paid in SRB or PRA kitty.
Earlier, while making a comprehensive and elaborative presentation on SRO 09, M. Adnan Mufti FCA, CPD Convener SRC dilated at length about legislative history of Sales Tax Withholding Tax Rules 2007.
He highlighted that due to rescinding of SRO 603, the requirement of tax deduction on purchase from unregistered sectors has been done away with. He also explained the background of Sections 2(21a) and 7 of Federal Excise Act 2005 read with RSO 543(I)/2008 dated 11 June 2008 and contended that excusable goods and services are outside the purview of Sales Tax Withholding Rules 2007.
He apprehended that as a result of new measures, corporate withholding agents might start / shift business in the name of AOP / Individuals; thus, corporatization would be hampered and adversely affected. Alternatively, mmanufacturers / importers might prefer sales to unregistered sectors or to AOPs / Individuals not liable to withhold tax.
On the issue of income tax / excise duty assesses being classi- fied as sales tax withholding agents, Mufti emphasized that the provisions of Income Tax Ordinance 2001 and Federal Excise Act 2005 do not provide any reference, authority or reliance upon Sales Tax Act 1990 and rules made thereunder for collection of sales tax for a company, not otherwise in sales tax fold, which may be made liable to withhold sales tax.
On the contrary, such reciprocity or counter reference only finds place in Sections 2(21a) & 7 of Federal Excise Act 2005 and Section 2(14)(c) of Sales Tax Act 1990 whereby excise duty is made adjustable as sales tax and vice versa.
Taking up a key issue regarding applicability of SRO 98 on invoices issued prior to 14 February 2013, Adnan Mufti referred to FBR's clarification dated 17 August 2009 whereby it was clarified that old invoices will not attract withholding tax. He elaborated that under SRO 98, 1/5th of the amount of sales tax, shown on the face of tax invoice, needs to be deducted. For instance, extra tax @ 0.75% would also undergo tax withholding over and above 16%.